Tips & Tricks To Choose The Right Engagement Model For Your Project

Outsourcing is a common term. It happens in many industries. But we always associate the name with the software industry. The main reasons for outsourcing are to save cost. Getting the job done by dedicated outsourcing companies is cheaper. It helps to get talent you don’t have, and it removes a lot of responsibilities from you.

As the first point is the most important, we need to see how companies pay for outsourcing. Does it work cheaper for the clients? How do they decide how much to spend? How are the payments calculated? This article will answer all your questions. But first, we will see what outsourcing and its benefits are.

“The important thing about outsourcing or global sourcing is that it becomes a very powerful tool to leverage talent, improve productivity and reduce work cycles.”

Steps to Right Engagement Model

1. Outsourcing And Types Of Outsourcing

Outsourcing is getting someone else to do your job. You use the skills and talents of other people to get your projects done. We will see the benefits and dangers of outsourcing later. But first, let us look at the types of outsourcing.

Outsourcing projects to Top Mobile App Development Companies overseas help you to save costs.

Moving the operations to a nearby country, popularly known as nearshoring

Getting own employees to work from their homes called homeshoring or onshoring.

There are certain jobs that outsourcing companies take from clients.

Developing application and program

Management and support of applications

Development and hosting of websites

Managing database

Telecommunication

IT outsourcing companies earned $500 billion in 2017, from companies and governments. This estimate is by Forrester Research. This amount was for IT outsourcing and equipment maintenance. You’re paying this amount for computer equipment support, networks, outsourcing infrastructure and application, hosting and application management.

Statista reports that outsourcing volume is likely to come down. But there will be growth in
cloud computing and IT outsourcing. The revenue of cloud infrastructure as a service (IaaS) was $717 million in 2010. It expects to grow to $26 billion by

Segment-wise earnings (in billion USD) of outsourcing companies from businesses and government from 2013 to 2017

2. Benefits And Dangers Of Outsourcing

Many companies have benefited from outsourcing. They continue to get at least part of the job done by outsourcing companies. There are both benefits and dangers of outsourcing. We will see them in short.

The benefits and dangers depend on specific projects and companies. There are ways to handle and solve the issues. But, other issues come up in outsourcing.

3. Issues Arising In Outsourcing

These issues pose a challenge to those who are managing the outsourcing. But, these are not issues that cannot be solved.

Unplanned Expenditure

There are expenses other than those that you pay to the outsourcing company. You must consult an IT contact specialist before you engage the outsourcing company. There may be unplanned travel to the country where you are outsourcing your work.

There are many services for which there is no planning done. But there is another expense that could come as a surprise. That is the amount you incur because of the delay in completing the project. There are many App Development Firms which charges hidden cost at the end of your project.

Time

Time is a significant constraint. You need to wait till you get the specialist for helping in outsourcing. You will have to spend the time to update new people.

Remote Locations

It is a constraint. Most outsourcing companies are far away from the client. It could be a constraint in coordinating work with an outsourcing company. You can overcome it by putting everything in writing. There should be a clear understanding between you both about your expectations.

The Human Element

It has great importance when people of two companies work. Each may have a different job to do. But, it makes it easy if a functional relationship exists between the various members of the team.

Different Languages

Your outsourcing company experts may be talking an entirely different language. It will undoubtedly create a little problem.

Data Security

If you are outsourcing work involving personal data, you need to be careful about who you hand over the job. These data have to protect. You should ensure the safety of your data.

Control

Control over the day-to-day functioning could be an issue too. You should take care of the power of the company’s strategy and development.

4. Different Models Of Outsourcing

There are three types of engagement that you can have with the outsourcing company. It will depend on various factors like the size of your project and the need for expertise. Each of them has its advantages and disadvantages.

The Dedicated Team

This kind of arrangement with an outsourcing company is right for projects that could run for a long time. The goal of the projects could often be changing. It could change the needs of the outsourcing team quite often.

This type of engagement is suitable when your team doesn’t have the skills needed for the project. You can get a team of experts to complete tasks requiring these talents. They will work alongside your team. It avoids the need for you to increase your team strength.

You need to pay the outsourcing company every monthly. The price will depend on the strength of the team that you need.

As the client, you have complete control over the team. You can guide the progress of the project. Your power helps you to keep your team and the outsourcing team in a good relationship. Both teams combine to give good results

How the Dedicated Team Model Works?

The outsourcing company and you must decide how many people you need in the team. You must also choose the skills you want.

In some instances, the outsourcing company may control the software product. It is a joint decision.

The web and Mobile app development service provider has to find the right team required for the project. The company should also chalk out the work process for the team.

There is a need for coordinating workload and project requirements between both the parties.

All the people are having the required skill become and team and work on the project.

The work time schedules are drawn and implemented by the team leaders.

The leaders manage the requirements of the team.

Team leaders track the progress of the project and report to you.

Pros of the Dedicated Team Model

Economical – It is less expensive to hire a team than employing them yourself.

More Focus – A dedicated has more focus on the project. It gives you better results. You can become completely involved in the project. You can make changes when required.

Better Evaluation – There should be good communication between the team and you. It will help in evaluating the progress in a better way. You can use various communication tools to improve the exchange of ideas and views.

Flexible – It allows you to improve or add new functionality

Cons of the Dedicated Team Model

Project Specific – This model is suitable only for long-term projects with changing goals. It is not profitable for short-term projects.

Hiring the Perfect Team – You should have the right team. Hiring could take a long time. It needs your complete involvement. It could consume a lot of your time.

Team’s Preferences – When the specifications are not precise, the team could work as per their preferences.

When we look at the pros and cons, this model of outsourcing is the best for long projects. The client has good control over the process.

The Time and Materials Model

In this model, the payment is for the actual work done. You calculate the real work time and pay every month. It is one of the most preferred models for companies. You get flexibility. You can make changes in the middle of the project. But you cannot put your finger on the exact cost at the beginning.

This model is suitable for long-term projects where there could be changes during the process — the goals of the project change as per market changes. There is better flexibility than the fixed price model.

Pros of the Time and Materials Model

Easy Adaptability – You can change the goals of the project according to shifts in the market.

Define Priorities – You can explicitly define project goals. Small companies and startups gain from this.

Manage Time – You have the power to have a tight schedule as you pay for hours worked.

Budget Control – You can control the cost while having the flexibility

Monitor Progress – You can track the progress as per fixed schedules. It will help test the performance.

Cons of the Time and Materials Model

No Proper Estimates – Though you control costs, you cannot estimate the exact total value. It is because of changes in the project based on market changes.

Constant Follow-Up – For the best results you need to follow up with the outsourcing company regularly.

No Fixed Time Frame – The uncertainty of the goals of the project make fixing a time frame difficult.

A clear understanding and good communication between both of you reduce risk. Due to changing goals, the project will go on until you get satisfactory results. The project could overshoot the estimated budgets.

No Fixed Time Frame

This model tilts in favor of the client. Outsourcing company has to be careful with time and resources due to fixing pricing. All extra expenses are the outsourcing company’s risk.

How the Fixed Price Model Works?

It’s suitable for short-term or medium duration projects.

This model suits projects with a fixed goal

It is useful if your budget is limited and fixed.

It is suitable for developing MVP (Minimum Viable Product)

You can use this model when you have fixed needs and timelines.

Pros of the Fixed Price Model

Fixed Price – Fix price & unknown budget.

Clear Flow of Work – You decide everything in advance including the stages of development.

Timely Delivery – You will get timely delivery of the project.

No Client Involvement – There is no need for you to spend your time. There is no role for you.

No Loss of Money – Your money is safe as you pay only after completion of the project.

Cons of the Fixed Model

Uncertain Results – As you have no role to play you cannot track the project. There is a risk of poor results.

No Feedbacks – As it leaves no scope for communication you may not get any feedback on progress.

Lengthy Preparation – You need to fix everything including the schedule and price. You also have to document all these.

Shortcuts – The outsourcing team might go for alternatives to achieve results within the deadline.

This model will work if you fix correct terms in the beginning. The result should be specified explicitly and accepted by both. You should ensure means for resolving issues that may arise. The outsourcing company may charge more considering that all the risk is theirs.

For the outsourcing company, it is better to collect payment in installments. It will leave only a small amount for the end. You may agree to this as a good business practice.

5. A Comparative Analysis

Fixed Price or Dedicated Team or Time and Material Model

Fixed Price – Good for short term projects. Need to plan the project fully well in advance. No scope for changing the project. There is a risk of a bad quality product. Difficult to implement this model as markets keep changing. It is good when your budgets are low. Outsourcing provider could overprice to cover risks.

Dedicated Team – Good for the long term and continuous projects. Permits you to get dedicated and specially skilled people. Can add people in the middle if there is a need. You are responsible for proper coordination between your team and the outsourced team.

Time And Material Model – It’s suitable for long-term and medium-term projects. You have control over the process. You can control budgets. But the total cost will remain unclear until the end. You can change your needs in the middle. It has good flexibility.

The comparative chart will give you a clear picture.

DEDICATED TEAM

TIME & MATERIALS

FIXED COST

Project Size

Large

Medium & Large

Small & Medium

Duration

Long

Average & Long

Small & Average

Your Control

High

Medium

Nil

Final Product

Not Defined

Not Defined

Definite

Requirements

Evolving

Evolving

Fixed

Technology Stack

Not Fixed

Can Change

Pre-planned

Flexibility

High

High

Nil

Scope Of Work

Estimated

Not Set

Predefined

Methodology

Agile

Agile

Waterfall

Price

Fixed per member

Fixed per working hour

Fixed For Project

Budget

Flexible

Flexible

Fixed

Time Frame

Estimated

Incremental Or Intermittent

Predefined

Dedicated Resources

Scalable

Not Assigned

Assigned

Team Scalability

Medium

High

Low

6. Choosing The Best Model

Choosing the best model for your project fully depends on your needs. Depending on the project you must decide which one is most suitable for you. Each one has clear specifics.

You should understand which of the models will be the least risky for you. You can outline all the pros and cons. Go through every aspect, and you will undoubtedly arrive at an informed decision.

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Passionate about everything happening in the field of Enterprise Mobility. The Co-Founder of eSparkBiz @Mobile Application Development Company where you can Hire Mobile App Developers.Interested in exploring various aspects related to Mobile Apps. Curious about knowing each everything that happens in the world of app development. It has landed him to be among the top-notch Entrepreneurs with 6+ experience in India and USA. Penning down his knowledge in the domain of mobile.